Key facts
- The European Banking Authority (EBA) released guidance on how banks must capitalize swaps written against repack vehicles.
- Dealers are uncertain about the implications of the EBA's guidance.
- A key question is whether bonds within a repack SPV can serve as eligible collateral to reduce counterparty risk.
Dealers are experiencing confusion following the European Banking Authority's (EBA) recent publication of two answers concerning the capitalization of swaps written against repack vehicles. The core of the uncertainty lies in whether banks can consider the bonds held within a repack special-purpose vehicle (SPV) as eligible collateral, thereby reducing their counterparty risk.